Skip to main content

Investment and savings. Supply-side vs. demand-side macroeconomic equilibria

  • Chapter
A Theory of Employment in Firms

Part of the book series: Contributions to Economics ((CE))

  • 98 Accesses

Abstract

One of the oldest issues in the history of economic thoughts is the question whether supply determines demand or demand determines supply. The supply-side argument, known as Say’s Law, is based on the idea that the motive behind supply is always the suppliers’ desire to earn income for being able to satisfy their wants. Thus, supply eo ipso implies demand, or as it was also formulated: Supply creates its own demand. The demand-side argument, central to the theory of Kalecki and Keynes, says that not the desire to purchase (i.e. notional demand) but effective demand is relevant. Since it cannot be taken for granted that the level of effective demand is high enough to absorb any volume of supply, firms base their production and employment decisions on the level of effective demand that they expect. Thus, expected demand determines supply i.e. the level of production and employment.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 39.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 54.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

Author information

Authors and Affiliations

Authors

Rights and permissions

Reprints and permissions

Copyright information

© 2002 Springer-Verlag Berlin Heidelberg

About this chapter

Cite this chapter

Falkinger, J. (2002). Investment and savings. Supply-side vs. demand-side macroeconomic equilibria. In: A Theory of Employment in Firms. Contributions to Economics. Physica, Heidelberg. https://doi.org/10.1007/978-3-7908-2649-4_7

Download citation

  • DOI: https://doi.org/10.1007/978-3-7908-2649-4_7

  • Publisher Name: Physica, Heidelberg

  • Print ISBN: 978-3-7908-1520-7

  • Online ISBN: 978-3-7908-2649-4

  • eBook Packages: Springer Book Archive

Publish with us

Policies and ethics